Contract talks between Arsenal and midfielder Aaron Ramsey have collapsed, a source has told ESPN FC, raising the prospect of the Wales international leaving on a free transfer next summer.

A source close to the situation said negotiations between the two sides were "at an advanced stage" just weeks ago, when a deal looked close to happening. But a final agreement was never reached and talks are now at a standstill, with no offer on the table from the club, the source said.

It was unclear why the negotiations broke down, although the BBC reported that Arsenal "decided they could not proceed" with an offer.

Ramsey is in the final year of his contract and now looks likely to leave on a free transfer unless he is sold in January at a cut-rate price.

It is the latest contract saga to play out at Arsenal that could have a destabilising effect on the team. Alexis Sanchez moved to Manchester United in January after refusing to sign a new deal, while Mesut Ozil finally penned a new contract that same month worth upwards of £300,000 a week.

The Ozil deal, along with the signing of Henrikh Mkhitaryan and Pierre-Emerick Aubameyang, has put a strain on Arsenal's wage bill. Ramsey, who is Arsenal's longest serving player and leading active goal scorer, has reportedly been looking for a deal worth in excess of £200,000 a week.

Coach Unai Emery, who took over from Arsene Wenger this summer, has said he views Ramsey as a key part of his team and has told the club he wants the midfielder to get a new deal. However, the new management structure at Arsenal means Emery has little say when it comes to contract negotiations.